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 Post Posted: Fri Jul 03, 2015 7:55 am 
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So, Greece is having a referendum on whether or not to take the offer they were given last week. If they vote 'no', Greece will probably be printing Drachma by August. Why, though?

It seems the crisis has two main roots; Greece running a deficit, and European bankers who made what they thought were sucker bets. Greece needed money to cover that deficit, right? So they turned to the financial types who had it, offering somewhat higher interest than did, say, Germany because they were a greater risk of default. Enter the money men; the bankers and the hedge funds mostly. They decided that there was no political chance that the creatures of the right would let Greece default, that somehow some taxpayer would always be stuck paying back those loans; ergo, they saw the higher rates as a sucker bet, one they couldn't lose. And they gambled heavily, throwing tens of billions of Euro onto the table.

Now what about today? Greece has since cleaned up its act, at enormous cost to itself. They're running a surplus, and that despite the depression that all that austerity has inflicted on them. The gamblers? Well, that's the crisis. They won't accept that they can lose; while Greece has the first actual left wing government anywhere in Europe since the current financial crisis hit, and that government is demanding that they admit they've lost in return for more cost to Greece. Complicating this is that the Greek people have been of two minds; they don't want to keep being slaves to the gamblers, but don't want to leave the Euro (which is what happens if they unilaterally refuse to keep playing).

And that brings us back to the referendum; the real issue in place is simply whether the Greek people want the Euro more than they want freedom from the gamblers (one of the biggest of which is Germany) telling them what to do. If so, the current government falls and some functionally right wing crowd will eventually replace it; and Greece remains economically very depressed into the indefinite future . If not, then either the bankers and the Germans admit defeat, or Greece leaves the Euro behind and issues some new Drachma. That would cause problems too; but most of them have already come to pass (bank holidays, capital controls, and the like).

Me, I'd suggest to the Greeks that they should vote 'no' (that is, to leave the Euro). It's been a bad deal for Greece, and they're pretty much certain to do better with a currency they can control going forward. Besides, facing the failure of their efforts to bring down the current Greek government, the Bankers may finally admit that they have to pay their debts of honor (because the alternative may well cost them even more dearly than it would the Greeks). If that happens, then Greece wouldn't have to leave the Eurozone after all. Cake and cookies all around.

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 Post Posted: Sat Jul 04, 2015 4:55 pm 
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AFAIK the referendum is on an offer by the creditors, that is meanwhile outdated. My overall impression is, that the creditors say that if the Greeks vote yes, details of the program can still be negotiated but if they vote no, there is no way they can keep the Euro. The Greek government however says, that if they vote yes, the austerity program comes in full, but if they vote no, negotiations will go on.

I also have read opinion pieces that either the creditors or the Greek government secretly want Greece out of the Euro (if it's a German camp article, the Greek government is the culprit, if it's from the Greece camp, it's the creditors), and therefore escalate the situation rather then doing actual negotiations. Personally both seem a bit far fetched to me.

I guess one part of the problem is, that a Greek government that does not have some sort of victory over the creditors, will also not have the popular support to do any sort of reform. And any German government that hands over any more aid money, without a face loss of the receiving government, will too have serious popularity problems, and probably also not last long, as this makes palace coups more viable.

My guess the best result to the referendum would be if it gets very close. Then neither side gets a really strong mandate and the loosing side is less likely make any angry hip shot reactions. If there is a very clear result, the winning side might think now it gets everything, and the loosing side might rather shoot itself in the foot in the huff, then give the others what they want.

My rather weak prediction (i definitely would not bet anything i want to keep on it) is, that in the long run the referendum will not be a turning point, but just one more incident in a long line of muddling around with much ado.

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 Post Posted: Sun Jul 05, 2015 6:27 pm 
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With the votes now being counted, the Greeks voted no by roughly three to two. The local press barons and the northern European money folks are probably not pleased. But with that said, the current Greek government stays solidly in power; and now can reasonably (for certain values of reason) claim to have democratic backing to leave the Euro if needs must (for certain values of need).

Me, I suspect negotiations will be rather more productive than less; there's little to keep Greece from just wiping the table clean of all outstanding debts if the creditors don't agree to take a haircut, which should make this time for a nice trim. But with 20/20 hindsight, one must note that the grandfathers of the creditors are the folks who decided that World War I was preferable to further diplomacy just over a century ago; and it looks like their grand kids might not quite have gotten the point. We shall see.

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 Post Posted: Mon Jul 06, 2015 4:48 am 
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Sofar neither side has made any knee jerk reactions. The creditors seem to settle on "Now it is time for the Greeks to make suggestions". The Greeks maintain that indeed reforms are neccessary, they just wanted a better negotiation position. Basically we are back to where we were when the current Greek goverment got into office and starting everything again.

And the Greek minister of finance has resigned. He might be a good ecconomist, but it seems like diplomacy is not his forte, so i guess it's true that he was employed in the wrong position, and using a moment of strength to replace him seems like good tactics.

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 Post Posted: Mon Jul 06, 2015 6:12 am 
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Not quite, I think. First, the creditors have lost; they now know they can't do an end run around the Greek government to install some center-right fellow travelers in Athens (so much for plan A). Second, but probably more importantly, the troika (Germany, the ECB, and the IMF) can't kick the can down the road anymore. If the ECB doesn't resume financial aid to the Greeks immediately, then by the end of the week Greece will de facto be issuing it's own money again; lack of Euros means it will have to pay it's internal debts in government IOUs (the definition of a fiat currency). Within a couple of weeks of doing that, Athens will have little choice but to formally abandon the Euro and call the IOUs Drachma again. The ECB was largely set up to keep that from happening, so they may not be very eager to keep playing the waiting game.

Meanwhile the creditors are waffling (no relation to any local waffles, of course). Greece already has an offer on the table, some reforms for some immediate debt relief and continuing financial aid. Said creditors turned it down last week when they hoped they could replace the current Greek government, but now Greece will simply say 'ahem' and restate exactly the same deal. A few hours of bloviating won't make things worse, I guess; but that's all the leeway they have.

Just to make matters more entertaining, the IMF recently admitted that the Greeks are right; absent debt relief they can never pay back their debts. What the creditors (and the IMF) have been demanding is eternal debt slavery. That might not play well for the troika if they have to ask the rest of the Eurozone to back their play against Greece, which Merkel is now trying to get France to do.

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 Post Posted: Mon Jul 06, 2015 9:49 am 
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I think a creditor friendly center right goverment would have been unrealistic regardless of the vote. Even if there is no tactical "tempering" vote (we don't want to give either side full power, so if we already have made our decision for one side in the referendum, we give it to the other side in the elections) there will be a large block of anti austeritiy parties (which party has how much would be open. Then there will be the ND which likely can't form a goverment alone, and a couple of minor center left or centrist reform parties, for whom it will be political suecide if they form a coalition with the ND, unless they can implement a major bread and games program.

The majority bonus in their election system allows somewhat more gambling but in a rough estimation, the ND would need to get at least 10% more the govern alone, which i consider very unrealistic. And given the fate of their former coalition partners in the last election, i don't think they can get a coalition partner cheap. BTW i think the majority bonus has aggrevated the current problems. First it has allowed the "old system" parties to ignore protest voters, letting them gamble that the bonus will keep them in power anyway. And now there is a goverment consisting almost entirely of inexperienced newcomers, who now have to make step from idealistic wish programs to realpolitik without having a coalition partner to blame for anything they can't deliver.

And i might be mislead by people having cried wolf way too often in the past, but analyses what will happen now, from now, and from when the SYRIZIA goverment got into power sound very similiar. And since then every other month there was one final deadline or an other, that has passed without anything fundamental changing. Hence my analysis, that neither side is prepared to finally admit defeat (and commiting to a Grexit would be) so they muddle along with one provisorium after an other.

Sure the Greek goverment now has gotten a better position. But even if there were a "yes" and a new goverment, the new Greek goverment would have had some similiar demands then the current ones.

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 Post Posted: Wed Jul 08, 2015 1:35 pm 
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What i get from a cursory look at what is presented in Austrain media:

* Sunday will be the absolutly last chance to prevent a Grexit. (some conference happens then)
* Neither side wants a Grexit
* The Greek goverment is shifting somewhat from "we have done enough cuts", to "cuts can't hit the lower class, they have to hit upper class and corporations". No details how that should happen as far as i can tell.
* The Eurogroup called Greek suggestions usefull, but that more details are neccessary. They are not optimistic though.
* Greece camp commentators are outraged, because the Greek goverment buckles before the creditors and betrays the voters who have voted no.
* Germany camp commentators are outraged that the EU is going to let Greece have it's way.

So my guess (i would say i am 70% sure so again a guess not certainitiy) is that on sunday the result will be that a good start has been done, but it was not enough, so no real solution, but now that there is a good start there will be some temporary modus operandi until the next deadline in a month or two.

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 Post Posted: Fri Jul 10, 2015 6:18 am 
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So, there's a Greek offer on the table. Many are calling it a surrender by Greece, but they're (shall we say) mistaken. Were the Greeks to have surrendered, their government would be offering to cut something in exchange for nothing. Instead they're demanding the surrender of the creditors; only an agreement to abandon the privileged position of the lenders and choose which lenders will lose will get anything tangible from Athens, ostensible deal not withstanding.

The interesting part is the rest of the deal. It's terrible for Greece. Indeed, it's pretty much what the creditors wanted which the Greek voters rejected. But, clever fellows that they are, the Greek government has apparently worked out that if that's not good enough then the entire onus of Grexit will rest on the Troika (Germany, the ECB, the IMF); but if on the other hand it forces a creditor surrender and real debt relief then much of it will be unneeded by the time it's supposed to roll around, as Greece will be doing much better by then.

In passing, France has sided with Greece. One suspects it will not be alone in doing so.

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 Post Posted: Sun Jul 12, 2015 8:39 pm 
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The list of European demands on Greece. The high points:

No debt relief, not even temporarily, no way.
All Greek laws and government regulations must be pre-approved by Germany and the ECB.
More austerity, now and forever.
If they get this, the creditors will allow a few weeks worth of Eurozone provided ECB aid; said aid which will mostly go straight into the pockets of the creditors (largely German).

If this looks somewhat like the terms the Germans offered when they conquered Greece back in 1941, well, it rhymes. One wonders if anyone behind it actually thinks Greece might accept, or even wants it to.

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 Post Posted: Mon Jul 13, 2015 4:35 am 
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...And Tsipras took a deal not much better. Well, no actual panzers were involved this time; I guess it had to be slightly better. I'm not sure what he's thinking; either he's hoping the Greeks will now finally agree to leave the Euro (though this seems an odd way to go about it), or he's drunk the koolade and really thinks Greece needs the Euro rather than the other way around. If the latter, he'll probably be out of power in the very near future; he'd be asking his entire anti-austerity party to commit suicide to ratify this by Wednesday.

In passing, I wonder if anyone in Athens has done their homework and set down contingency plans to reintroduce the Drachma. That detail would pretty much answer where Tsipras really stands.

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 Post Posted: Mon Jul 13, 2015 10:09 am 
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Ecconomically a Grexit might make sense. I am not good enough in ecconomy to say for sure. My gut feeling says no, because the pre-Euro Greek ecconomy policy of pretty constant devaluation of their currency seemed more like a stage magicans trick to create the apearence of ecconomic progress, without having any, then anything else.

In matters of prestige however it would be a blow for everyone involved, but more so for the Greeks. It would a definite declaration, that ecconomically they are far behind pretty much everyone in the EU, including some former east block countries like Slovakia and Slovenia.

SYRIZIA's platform has always been "pro Euro and anti austerity". I can't say where the chips will fall if there is a decision between thoose two. But i don't think the current Greek goverment would survive a Grexit either.

But it's my impression that trying to keep going without doing their homework is pretty much standard operating procedure for Greek goverments. The past Greek goverments have just tried to buff themselfs through by playing nice with the EU, while the current one tries throwing tantrums and then seek reconciliation.

There is a lot of homemade problems in Greece, like widespread corruption and tax evasion. And AFAIK wealth distribution is more extreme then in other european countries. I had hoped, that the SYRIZIA goverment would have started to do something in thoose fronts, independent of what they do with the rest of the EU. But if they have done anything, i have not heared about it. And i guess this impression also makes their potential allies in the EU less dedicated.

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 Post Posted: Mon Jul 13, 2015 6:43 pm 
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Greece has been running a primary account surplus for the last few years (tax revenues are above government spending), and this in an economy gutted by austerity. They really have no problems collecting taxes, and haven't had for a while. What they don't have is all that much to tax anymore; their economy has shrunk so much these last five years that despite the government running a surplus, the total debt has gone from 140% of GDP to 170%. Unless they completely reverse course and go back to mindlessly throwing money around, the Drachma should stabilize fairly quickly and that would be that. Mind you, this would probably be the deathblow of the Euro; if Greece defaults, leaves, and prospers,then the rest of the debtor countries will go forth and do likewise unless Germany crawls (which it will never do).

There is a recent precedent for this, economically anyway. Argentina decided that their previous hard money policy was insane in 2002, and delinked the Peso from the US Dollar. The economy, which had been steadily contracting all through 2001, quickly turned around and grew fairly well for the rest of the year. Now some folks will claim just the opposite (especially folks trying to scare the Greeks); but if you look at their numbers you will see that they start their comparison from the beginning of 2001, thus blaming the contraction during the hard money era on the soft money policy of 2002. They probably know better; but they're not being paid by soft money fans.

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 Post Posted: Tue Jul 14, 2015 9:49 pm 
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Ok, this is amusing. The IMF, who is supposed to be the one running the Greek financial sector under the deal, has basically refused outright to do it. Moreover, it has denounced the entire agreement; saying that the estimates of Greek economic performance are absurdly high, that the Greeks can't possibly run the kind of surplus they're being asked to, and that it's physically impossible for Greece to turn around at all without the creditors writing off tens of billions of Euro worth of debts up front. Their estimate is that the debt to GDP ratio will quickly hit 200% if the agreement isn't scrapped and redone.

Anyone think the odds of Athens ratifying anything by tomorrow night (their time) just got better?

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 Post Posted: Thu Jul 16, 2015 6:52 am 
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And Greece ratified the deal mandating massive new austerity (among other things). Tsipras even got about two-thirds of his anti-austerity party to go along with it. I hear there was a fair amount of 'eat the rich' policies added on the Greek end, but I'm still curious what the selling point was for a deal which is certain to make things worse for Greece as sold. Perhaps a blend of staying in power and the full intention of abrogating the deal down the road while continuing to eat the rich? Will the Greek people even let them stay in power at this point? Well, we'll see.

Oh, and if his speeches to the Greek parliament were anything to go on, Tsipras has quaffed deeply of that yummy koolade. Finding the nerve to stand up to the creditor types is apparently something he will never do.

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 Post Posted: Thu Jul 16, 2015 10:07 am 
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Agreeing to deals and hoping to somehow get away with not fully fullfilling it would not be a new thing for Greek goverments. After all Greece got into the Euro at least partly by lying about their ecconomic data. (i also have heared that the other EU countries did know that at that time, but let it slide for political reasons).

My impression on what the SYRIZA program is was always, "Keep the Euro, remove as much austerity as possible". So their position now seems consistent.

It seems that Germany (or a faction in the German goverment) either did favour a Grexit, or did bluff with it. That would also go along with the popular opinions, as AFAIK a Grexit would be much more popular in Germany then in Greece.

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